USD/JPY advances towards 137.00 as Fed sticks to the path of hiking interest rates

• USD/JPY is scaling higher towards 137.00 as Fed may step up interest rates with ongoing acceleration.
• US CPI’s appreciation is not haunting anymore, however, an establishment above 8% is worrisome.
•  The BOJ will stick to its loose policy until inflation stabilizes at around 2% for at least two years.

The USD/JPY pair is marching towards 137.00 after a sheer decline to near 135.80 on Tuesday. The asset went through the carnage on Tuesday after the dismal US Purchasing Managers Index (PMI) data forced the market participants to dump the US dollar index (DXY). However, the DXY is expected to regain the upside track as the Federal Reserve (Fed) is sticking to its path of hiking interest rates despite a contraction in private sector activities as their focus is on achieving price stability.

The commentary from Minneapolis Fed Bank President Neel Kashkari that the central bank will keep on hiking interest rates until it finds multiple evidence, which could warrant that the inflation rate will scale down to 2%. This time, appreciation in the price pressures is not haunting but its establishment above 8% is a big reason to worry.

Fed’s Kashkari also added that ‘Half to two-thirds of US high inflation is driven by supply-side shocks. And, there is no denying the fact that supply bottlenecks are normalizing, which may trim price pressures ahead.

In today’s session, investors will keep an eye on the US Durable Goods Orders data. The economic data is seen at 0.6% against the former figure of 2%. In times, when the US economy has already displayed an unchanged US core Consumer Price Index (CPI), a decline in the economic data is not lucrative for the US dollar index (DXY).

On the Tokyo front, the yen bulls are expected to shift into a negative trajectory against the greenback for a prolonged period. The Bank of Japan (BOJ) Chief Economist Kazuo Momma predicted that the BOJ won't be able to ditch easy policy until inflation stabilizes at around 2% for at least two years.